Correlation Between Payden Absolute and Transamerica Intermediate
Can any of the company-specific risk be diversified away by investing in both Payden Absolute and Transamerica Intermediate at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Payden Absolute and Transamerica Intermediate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Payden Absolute Return and Transamerica Intermediate Muni, you can compare the effects of market volatilities on Payden Absolute and Transamerica Intermediate and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Payden Absolute with a short position of Transamerica Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Payden Absolute and Transamerica Intermediate.
Diversification Opportunities for Payden Absolute and Transamerica Intermediate
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Payden and Transamerica is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Payden Absolute Return and Transamerica Intermediate Muni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Intermediate and Payden Absolute is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Payden Absolute Return are associated (or correlated) with Transamerica Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Intermediate has no effect on the direction of Payden Absolute i.e., Payden Absolute and Transamerica Intermediate go up and down completely randomly.
Pair Corralation between Payden Absolute and Transamerica Intermediate
Assuming the 90 days horizon Payden Absolute Return is expected to under-perform the Transamerica Intermediate. But the mutual fund apears to be less risky and, when comparing its historical volatility, Payden Absolute Return is 1.53 times less risky than Transamerica Intermediate. The mutual fund trades about -0.13 of its potential returns per unit of risk. The Transamerica Intermediate Muni is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 1,073 in Transamerica Intermediate Muni on September 1, 2024 and sell it today you would earn a total of 15.00 from holding Transamerica Intermediate Muni or generate 1.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Payden Absolute Return vs. Transamerica Intermediate Muni
Performance |
| Timeline |
| Payden Absolute Return |
| Transamerica Intermediate |
Payden Absolute and Transamerica Intermediate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Payden Absolute and Transamerica Intermediate
The main advantage of trading using opposite Payden Absolute and Transamerica Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Payden Absolute position performs unexpectedly, Transamerica Intermediate can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Transamerica Intermediate will offset losses from the drop in Transamerica Intermediate's long position.| Payden Absolute vs. Jhancock Disciplined Value | Payden Absolute vs. Americafirst Large Cap | Payden Absolute vs. Aqr Large Cap | Payden Absolute vs. Dunham Large Cap |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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